Correlation Between GM and Ben Thanh

Can any of the company-specific risk be diversified away by investing in both GM and Ben Thanh at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GM and Ben Thanh into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and Ben Thanh Rubber, you can compare the effects of market volatilities on GM and Ben Thanh and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GM with a short position of Ben Thanh. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Ben Thanh.

Diversification Opportunities for GM and Ben Thanh

0.43

Correlation Coefficient

GM  Ben Thanh

Very weak diversification

The 3 months correlation between GM and Ben is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Ben Thanh Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ben Thanh Rubber and GM is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on General Motors are associated (or correlated) with Ben Thanh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ben Thanh Rubber has no effect on the direction of GM i.e., GM and Ben Thanh go up and down completely randomly.

Pair Corralation between GM and Ben Thanh

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Ben Thanh. In addition to that, GM is 2.74 times more volatile than Ben Thanh Rubber. It trades about -0.01 of its total potential returns per unit of risk. Ben Thanh Rubber is currently generating about 0.0 per unit of volatility. If you would invest  1,435,000  in Ben Thanh Rubber on December 24, 2024 and sell it today you would lose (5,000) from holding Ben Thanh Rubber or give up 0.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.08%
Values	Daily Returns

General Motors  vs.  Ben Thanh Rubber

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Ben Thanh Rubber

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ben Thanh Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Ben Thanh is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GM and Ben Thanh

The main advantage of trading using opposite GM and Ben Thanh positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Ben Thanh can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Ben Thanh will offset losses from the drop in Ben Thanh's long position.

The idea behind General Motors and Ben Thanh Rubber pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.